How To Pay Your Employees In Chile

Regarded as a strong trading partner and export market, Chile is recognised for its open market policies, zero tariffs, stable democratic government, solid business practices, and low corruption rates.

For any business looking to operate in Chile, having local knowledge about payroll policies can help understand the challenges and opportunities in the country.

Paying employees

Each company has its own benefits and payroll structures and cycles for employees. However, the unit of time for payment cannot exceed a month. The minimum wage valid as of January 2018 is 276.000.00 CLP for workers between the age of 18 and 65 years. Different rates apply for workers over the age of 65 and under 18 years. Employees with an employment contract that specifies overtime must receive an additional payment depending on the time and day corresponding to the 50% of their hourly wage.

When a company hires an employee, the employment contract must state the salary, the type of payment and the day that the salary will be provided, this is detailed in Article 10 of the Labour code. The employment contract is a legal and mandatory document. The purpose is to formalize the relationship between the employer and employee with the rights and obligations outlined. The employer is required to pay the salary and benefits stated in the employment contract correctly and on time.

The Chilean Labor Code allows the employer to terminate an employee's contract, based on the organisation's needs. The termination notice must be delivered to the employee 30 days in advance and personally or by certified mail. A copy of such notice must be sent to the appropriate labour inspector. The employer may choose to pay the employee 30 days salary, in lieu of such prior notice. Severance payments in the event of layoffs are capped in both amount of 90 UF's (about 3,800 USD) as well as time (11 years) even if the person makes more money or has been an employee longer.

Chile has five specific payroll laws that govern and regulate the payroll processes throughout the country.

Labor Code Income Tax Law Law No. 16,744, related to accidents at the workplace or work-related ilnesses ("Las Mutualidades") Law No. 20,255, Social Security reform Bustos Law The monthly tax taken out of all paychecks is called "Impuesto único de Segunda Categoría".The tax is determined by applying a progressive chart, with the percentages of effective tax dependant on the employee's income.